The Hoffman Auto Group has finished a $40 million construction project, with much of the money going towards increasing the capacity of dealership service departments.
Nine buildings at three locations are “virtually new,” Co-Chairman Bradley Hoffman says. The 11-franchise group operates dealerships in East Hartford, West Simsbury and New London, CT.
“We've been in the construction business,” he says of the building project. “It was planned six to eight years ago and all came to fruition at the same time.”
With vehicle sales soft and warranty work down industry-wide, Hoffman is gunning for more customer-pay service work. Many dealers are doing the same thing, but few with the fervor of Hoffman.
“We'll do whatever we have to do to get customers in for service,” he says. “I want to get them into the shop, whether it is for a $40 RO (repair order) or a $400 RO. We are really going after that business.”
The group has increased its service-department advertising from 5% to 30% of the overall ad budget.
“Every person who buys a car from us gets a call from the service manager,” says Hoffman, who sometimes will phone those customers himself to make sure the service manager called them.
Many consumers are buying vehicles less often. By keeping their vehicles longer, they are more likely to require service and maintenance work
“If people keep their cars longer, there is business to be had,” says Jad Dunning, CEO of DriverSide, an automotive website for consumers.
Americans are putting more miles on their vehicles than before, according to a survey by AutoMD, an online repair resource. Nearly 50% of people polled say they have driven their current vehicle more than 100,000 miles (160,000 km).
Car owners such as these will spend an estimated $2,500 more on repairs over the intended life of the vehicle, says AutoMD President Shane Evangelist.
Yet, the drop in car sales could hurt dealership back shops, says J.D. Power and Associates, estimating that dealer service traffic will drop 20% between 2009 and 2013.
“Over time, many vehicle owners gradually defect to non-dealer service facilities for repair and maintenance needs, particularly when the warranty period expires,” says Jon Osborn, research director at J.D. Power.
To retain customers, dealers must focus on high levels of service, convenience and more competitive pricing than in the past, he says.
AutoNation Inc, the country's largest dealership chain, is heating up its efforts to get more service work, especially with warranty work down by double digits, says AutoNation President Mike Maroone.
“We're expanding service offerings, going to 7-day-a-week service and doing a lot more prospecting and a lot more training,” he says. “We are getting aggressive, innovative and testing the organization.”
AutoNation Inc. makes an effort to get car buyers to purchase extended-warranty and prepaid-maintenance plans not only for the finance-and-insurance department revenues, but also for the return business.
“If we can get them back for service, they are three times more likely to buy a car from us,” says Maroone.
Chrysler-Jeep-Dodge dealer David P. Kelleher of the David Auto Group in Glenn Mills, PA, worries that fewer car sales could mean fewer service customers.
“I'm concerned that if we aren't selling these cars, these aren't our service clientele,” he says at a recent AutoTeam America conference. “A lot of people don't wake up in the morning and say, ‘Maybe I'll buy a Chrysler.’ So we've got to work on it.”
“The dynamics in the service department has increased,” says Chuck Basil, president of Basil Ford in Buffalo, NY. “We're shifting more from a warranty to a maintenance shop.”
Selling more accessories is another way to bolster the back-shop's bottom line. But many dealers struggle with those sales.
For Basil, improving accessory sales “is a work in progress, without much success lately.”